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“These two funds are ‘chalk and cheese’, given one is an active offering which taps into American companies which demonstrate strong growth prospects, while the other is a passive fund which focuses on large-caps with a blended investment style,” said McDermott.
The Vanguard ETF is a low-cost offering for investors to gain exposure to the broad US stock market, represented by the S&P 500 index. Which is the most widely-recognised benchmark of US equity market performance. It is dominated by the stocks of large companies and is considered a bellweather for the state of the US economy.
In contrast, the managers of the AXA Framlington American Growth Fund have an unconstrained bottom-up approach, with stock selection the primary source of added value.
Axa lead manager Steve Kelly believes that US growth stocks have the potential to tap directly into the faster growing industrials, healthcare, technology and consumer sectors.
He and co-manager Dan Harlow “concentrate on proven businesses with established management teams that enjoy significant opportunities for organic growth”, McDermott explained.
“All of which means the portfolio tends to have a mid-cap bias.”
In practice, the investment team favours sectors that benefit from high levels of innovation, strong brands, product differentiation and high barriers to entry. As a result, it usually has large positions in the consumer discretionary, healthcare and technology sectors.
On the other hand, the fund will typically have fewer holdings in sectors that are highly reliant on the state of the economy to fuel growth, or are already fully mature — such as utilities, basic materials and consumer staples.
Both the Axa fund and the Vanguard ETF include Microsoft, Apple, Amazon and Facebook among their top five holdings. However, the growth bias of Axa means that its portfolio is more skewed towards the technology leaders (which includes Alphabet).
|Manager||Stephen Kelly, Dan Harlow||Vanguard|
|Three-year cumulative return*||56.09%||46.78%|
|Three-year annualised return*||14.82%||12.86%|
|Three-year annualised alpha*||1.94||0.41|
|Three-year annualised volatility*||14.77%||12.63%|
|Morningstar star rating||***||*****|
|FE Crown fund rating||***||–|
|OCF (retail share class)||1.04%||0.18%|
Source: FE Analytics; Morningstar. *28 Mar 2016 – 28 Mar 2019
Sector Weightings (28 February 2019)
|Sector||*Axa %||**Vanguard %|
Source: *FE Analytics, **Vanguard factsheet
Top 5 holdings (28 February 2019)
|Axa*||% weighting||Vanguard**||% weighting|